Running on empty: Fuel price drop not much relief for indebted consumers

The lower fuel prices kicking in today are not expected to be of much help for indebted consumers who still have to deal with the financial pressure cooker of 2023 that left two-thirds of South Africans unable to pay their bills.

From Wednesday, 3 January motorists can breathe a small sigh of relief after the drop in the price of petrol and diesel despite recent challenges in global oil markets, including attacks affecting shipping routes.

The price of 95 unleaded petrol decreased by 76 cents per litre at midnight and 93 unleaded by 62 cents.

Drop in fuel price: Relief at the pumps for consumers

The main reason for these decreases was the downward movement in the average international product prices of petrol, diesel and illuminating paraffin, in line with the lower crude oil prices. The average Rand/US dollar exchange, while playing a smaller role, also contributed.

That means that motorists will pay R22.17 per litre for 93 Unleaded petrol, down from R22.79 in December and R22.49 for 95 Unleaded, a drop from R23.25. 

It is good news for owners of diesel-driven vehicles too, as the price of diesel decreased by between R1,18 and R1, 26 per litre.

Global oil price warning…

However, consumers should not get their hopes up, as the current geopolitical developments affecting international oil prices, such as concern around shipping routes in the Red Sea, cast a shadow over the sustainability of this downward shift, Neil Roets, CEO of Debt Rescue, warns.

“While the cost of diesel for transporters will no doubt alleviate the financial pressure on these companies, it remains to be seen whether this will affect the price of goods and provide any financial relief for consumers.”

‘Januworry’ and beyond: Consumers struggle with heavy debt burden

He says although any financial relief is welcome, indebted consumers still carry the financial burden of 2023 into the new year, intensifying the annual “Januworry” trend of entering the year with more debt.

“Interest rates remain at the highest level since April 2009 and the impact on South Africans shows. We are deeply concerned that the financial pressure cooker of 2023, driven by the high cost of living, soaring inflation, high interest rates and ever-escalating electricity, food and fuel prices, has left the nation teetering on the brink of despair.”

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SA consumers running on empty: 66% of survey respondents skip meals

Roets says when 66% of people surveyed by Debt Rescue say they started to skip meals because they can no longer afford three meals per day, it is time for the authorities to sit up and take notice.

According to the 2023 NIQ Consumer Outlook Report for South Africa, consumers are feeling the squeeze in a challenging economic landscape, with the majority experiencing the adverse effects of the current financial climate.

A massive 70% of those surveyed, already feel they are living in a recession, while 76% said the increased cost of living was to blame for their financial struggles.

Red light: Ripple effect of decline in personal disposable income

The decline in personal disposable income is another red light that must not be ignored.

“The latest stats show that disposable income declined by 2.9% in the third quarter of 2023, while inflation continued to outpace wage and salary increases. This is especially concerning given that the cost of servicing debt increased at the same time, consuming 8.9% of disposable income, up from 8.8% in the second quarter.”

According to TransUnion’s Consumer Pulse Study for the third quarter, debt management remains a concern, with more than one in three South Africans (38%) unable to pay their current bills and loan obligations.

“It is deeply concerning that a massive 69% of indebted consumers in South Africa say they cannot pay their bills on time every month. We expect that South Africans took on more debt over the festive season and will therefore lean even more heavily on their credit and store cards to get through January,” Roets says.